Pentagon OKs Merger of Boeing, Hughes Satellite Unit

Boeing Co. has won approval from the Defense Department to buy Hughes Electronics Corp.’s El Segundo-based satellite-making business, gaining a key regulatory endorsement for its push beyond aircraft building.

The Pentagon notified the Federal Trade Commission last week that it had no objections to the $3.75-billion transaction, which would make Boeing the world’s largest maker of commercial satellites as well the biggest builder of aircraft. It would also further solidify Boeing’s position as the top private employer in California.

Under the deal, Boeing would absorb about 9,000 Hughes employees, bringing its total California work force to about 46,000.

Regulators at the FTC and the European Commission are reviewing the purchase to ensure that Boeing doesn’t use Hughes’s dominant position as the world’s biggest satellite maker to push customers to its own launch vehicles.

“The [Defense] Department has informed the FTC that it would not object to this proposed merger so long as certain steps are taken to preserve competition in the market,” said Bryan Whitman, a Pentagon spokesman.

Whitman declined to comment on what might be done to safeguard competition until the FTC review is completed.

Boeing is also the U.S. military’s largest builder of intelligence satellites. Last year it unseated long-time incumbent Lockheed Martin Corp. in a multibillion-dollar contract to build the next generation of imaging satellites for the National Reconnaissance Office.

Analysts have said it’s unlikely Boeing would have to divest any businesses to gain full regulatory clearance. They noted that consolidation among major aerospace companies has already resulted in a concentration of launch, manufacturing and satellite-leasing capability into the hands of fewer companies.

On the New York Stock Exchange, shares of Seattle-based Boeing rose $2.06 to close at $47.75 and Hughes, a unit of General Motors Corp., rose 13 cents to $31.13.